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MannKind Has Mountain to Climb If FDA Approves Afresa and TechnoSphere

MannKind bought the old inhaled insulin plant* inventory Pfizer used for Exubera last month, just one month after the FDA accepted its application for Afresa, another inhaled insulin product.

So the company appears poised for a big leap -- if the FDA allows MannKind to sell its drug (delivered via its TechnoSphere inhaler, pictured) it can finally start earning some revenues.

Take a look at how high that leap will have to be. So far, MannKind's net loss to shareholders is more than $1.4 billion. The company burns about $60 million to $70 million a quarter, and it hasn't even got into its commercial launch expenses yet. Given that Pfizer only made $12 million in YTD sales on Exubera, MannKind's TechnoSphere will have to be about 116 times more popular than Exubera to make back that $1.4 billion.

It could happen. Exubera was a disaster because the device was huge, the technique to use it tricky, and the dosing calculation difficult. The TechnoSphere is small and MannKind promises it will be easy to use.

MannKind's problems don't end there. On its Q1 2008 call, management discussed a cancer signal that had occured in Exubera patients, one of the reasons Pfizer ended its marketing of the product:

CEO Alfred Mann: there have been six newly diagnosed cases of primary lung malignancies among EXUBERA treated patients. And one newly diagnosed case among comparative treated patients.

The actual incidence of lung cancer was consistent with statistics within the general population and that incidence was actually low because every one of those patients was a smoker.

Nearly every analyst on the call had questions about cancer. One problem is, even if the cancers only appear in smokers, does this mean that former smokers can't use inhaled insulin? Management said the FDA has not yet asked it for a long-term outcomes study -- which it surely will if there's a cancer signal in the data.

A year later, on the Q1 2009 call, Mann said the cancer controversy had not gone away:

It seems to me that the concern about lung cancer should have ended by now since there is no factual basis for such concern. Even for Exubera, there was no conclusion as to causality or acceleration and AFRESA is so very, very different. In relation with AFRESA, it is certainly less risky than for some other chronically entailed drugs and even less so than breathing in a large city. An advisory committee has dismissed any risk of lung cancer from AFRESA. While we are seriously concerned about this risk, all of the data gives us confidence that any concern about lung cancer with AFRESA is without foundation and is bogus. Nevertheless, we must address some perceptions that have been created.
No doubt. But think about that: Here's a company with a novel, non-injection diabetes treatment that already has its application in with the FDA in a category where there are no competitors -- and no one wants to get into a joint marketing venture with them no one has yet agreed to get into a joint marketing venture with them. Mann indicated that might be about to change in his Q1 2009 call:
Last May, we ourselves reset partnership talks and we have always said that we would not discuss partnership status until there is an actual contract. However, I will say as did Hakan that we are in serious discussions with a number of companies that we believe would be excellent partners for AFRESA.
Investor Nate Pile wrote recently of his speculative buy in the firm. He could have been writing about the firm itself:
I believe we are looking at a situation in which we will either lose most of our money, or triple (or better) our investment in a fairly short period of time.
*See comments section for clarification. This article has been updated to reflect the fact that while MannKind has not yet signed up a marketing partner, it says it is in talks with companies.
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